BofA-MBIA Settlement Report Sees Stocks Spike

By Sam Mamudi

Shares of both Bank of America (BAC) and MBIA (MBI) spiked a few minutes ago after Dow Jones Newswires report the two have reached a settlement in their dispute over loan losses tied to Countrywide Financial, which BofA bought in 2008.

According to Dow Jones, citing unnamed sources, BofA will pay MBIA about $1.6 billion in cash and take a roughly 5% stake in MBIA’s holding company. BofA will also give MBIA a $500 million credit line.

As WSJ MoneyBeat’s David Benoit writes:

The reported deal would be a lifeline for the bond insurer, which was hit with giant losses from the fallout of the mortgage collapse, as it had insured billions in mortgage-backed securities. MBIA had used stark language in its own filings about the life or death nature of its legal battles with BofA.

At the latest BofA’s shares are up 4.2%, while MBIA’s stock has soared 40%. MBIA’s stock was briefly halted after its sudden rise tripped the single-stock circuit breaker.

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